An employer’s ability to protect its customer relationships and confidential information begins with a carefully drafted agreement which clearly sets forth the employee’s obligations. As a recent case out of the U.S. District Court for the Northern District of Ohio shows, a poorly drafted agreement will often scuttle an otherwise strong case. In the case of Alloy Bellows & Precision Welding, Inc. v. Cole, Civ. No. 15-494 (N.D. Ohio Apr. 22, 2016), for example, the district court ruled that the employer was not entitled to preliminary injunction to enforce a two-year non-compete and nondisclosure agreement against a former employee because the employer used an “or” when it should have used an “and.”
In Alloy, a former employee left the employer and went to work for a competitor, disclosed confidential information and intended to solicit his former employer’s customers. The employer sued, based, in part on an agreement which stated, among other things,
Either during your working relationship with Alloy Bellows, or for a period of two(2) years after your working relationship and/or severance period ends with Alloy Bellows, you agree and accept that you shall not, (I) directly or indirectly engage in any business that completes (sic) with Alloy Bellows in any way in North America … .
The district court refused to enforce this non-compete agreement, calling it “poorly drafted.” The former employee argued that because the language is written in the disjunctive, a plain reading means he was prohibited from competing with Alloy Bellows either while he worked for them or after he stopped working for Alloy Bellows, but not both. Since there was no allegation he competed with Alloy while he worked for them, he contended he did not violate the express terms even if he competed with Alloy after he left its employ. Alloy argued that the language was conjunctive and any other reading was “absurd.” The district court found that the language in the Non-Compete was ambiguous as it could refer to one choice between two things or both choices:
The use of ‘either, or’ is disjunctive, and generally is used to state a choice between two things i.e.- ‘Sam will either exercise or rest today.’ However, in some context it may include both choices - i.e., ‘You may buy bread at either Giant Eagle or Safeway.’ The intent of the parties is critical on this issue, but that is a question of fact that cannot be determined at this juncture. Therefore, Plaintiff has not proven by clear and convincing evidence a substantial likelihood of success on the merits of its Breach of the Non-Compete agreement and its motion for injunctive relief is denied on this basis as well.
Accordingly, the district court refused to issue a preliminary injunction.
BOTTOM LINE: The ability to protect one’s customer relationships and intellectual property begins with the careful and precise drafting of a written agreement that sets out the express intent of the parties. Obtaining injunctive relief is tough enough under the best of circumstances. Employers should not make it harder on themselves by using “off-the-shelf” agreements or agreements drafted a long time ago. We recommend that employers contact labor counsel so that they can thoroughly review their agreements and, if necessary, re-write them. Please call us if you have any questions.